You might also like this little excerpt from Barron's On-Line Roundtable discussion.
from the interview with Art Samberg:
Q: More immediate, how do you think the market will wind up the year?
A: We all know what the issues are, but I don't know the outcome. I follow the fundamentals of companies and the emotion of the crowd, and watch very carefully how the market is voting. I think "buy the dips" will work because this is a long cycle. But the parameters of what you buy on the dips clearly change. At least for the remainder of this year, and probably forever, you want to buy dominant companies in areas where all kinds of good stuff is happening. That's why we like Gemstar International, which is a strange animal in that it's an intellectual property company. But it incorporates all the attributes that made the prior generation of 'Net companies like Yahoo, AOL and, in some ways, Microsoft very successful.
Q: How so?
A: Interactive TV is a huge market, and Gemstar has tied up the intellectual-property rights to the electronic programming guide. When you get into the digital age with hundreds of channels, you can't live without it. People have fought the validity of this copyright protection, but now Microsoft, John Malone and others have signed deals with the company. Right now Gemstar just has a programming guide, but in the future it will be an advertising medium. The company is in the process of merging with TV Guide, in a deal that everyone hoped would be done by the end of June. The government is still reviewing the combination. Even if it doesn't happen, TV Guide would still have to pay Gemstar royalties. Here's another thing: Gemstar made two acquisitions in the electronic-book area in January, which no one has paid attention to. They have patent encryption technology to protect themselves from piracy. The music industry wasn't on top of this, but the book industry is smarter.
Q: Let's go to the numbers. Where is Gemstar trading?
A: The stock is at 52 [it has since fallen to $46], and the company has $23 billion in combined market value, assuming the acquisition of TV Guide. In the fiscal year ended March EBITDA mearnings before interest, taxes, depreciation and amortization] was $131 million. This year, who knows? It could be anywhere from $280 million on up. Sales last year were $241 million. This year they could do about $1.15 billion. The stock has been all over the map, like everything in my portfolio. But I love the story.
So, GMST is a "story stock" ... Now I understand what's been happening to that part of my portfolio. But I still am enamored with the comparisons to Net stocks, which imply the Godzilla characteristics (ref: Moore's Revised Gorilla Game) that Mike Buckley has noted in the past.
tim |
